Enhanced annuities lead the way

Category:
Annuities

Updated:
27/10/2011
First Published:
19/08/2009

MONEYFACTS ARCHIVE

This article was correct at the time of publication. It is now over 6 months
old so the content may be out of date.

Enhanced annuities pay out an average of 22 per cent more than standard annuities in annual retirement income, meaning a retiree could benefit to the tune of thousands of pounds by investing in such a product.

Based on average rates, a male retiring at 65 with a pension pot of £50,000 would receive an additional £3,575 for the first five years of retirement if he qualified for an enhanced policy – equivalent to £715 extra a year.

If the same customer lived to his life expectancy, he would receive £8,580 more than he would with the average standard annuity product, MGM Advantage's Annuity Index has revealed.

Women would benefit even more, with the difference between enhanced and standards annuities of the average retirement recorded at £11,594.

"Many people close to retirement don't realise they can shop around for the best annuity rate and increase their retirement income by thousands of pounds," commented Craig Fazzini-Jones, director of MGM Advantage.

"Last year, over 60 per cent of people buying an annuity chose the one offered to them by their pension provider. Shopping around is easy to do, especially with help from a financial adviser."

The products, which are also known as impaired life annuities, offer people with medical problems or health issues, such as weight problems, a larger pension pot.

And, should such annuities prove as popular in the second half of 2009 as they did in the first – sales totalled £891 million between January and June – enhanced products will record a record year, with £1.8 billion sold – easily beating the previous record of £1.4 billion, recent data from Watson Wyatt found.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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